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$15 minimum wage, tip-credit divides restaurant workers

ST. PAUL — The fight over whether and how to implement a $15 minimum wage is heating up in St. Paul.

Newly sworn-in St. Paul Mayor Melvin Carter has said the minimum wage increase is a top priority in his administration, and the polarizing issue has divided local restaurant workers.

Some in the industry have joined a nationwide fight for a tip credit, which would allow employers to pay tipped employees a lower base wage, provided their tips get them to at least $15 an hour.

Others have aligned themselves with the organization 15 Now, a group that fought successfully for a similar proposal in Minneapolis, and advocates for keeping the system status quo — that is, tipped workers would continue to be paid the same minimum wage as everyone else, no matter how much they earn in tips.

In response to media requests for this story, Carter offered a statement on his stance on a $15 minimum wage, which reads:

"I support a $15 per hour minimum wage, to ensure no one who works full time is ever stuck raising children in poverty. This fall, Saint Paul voters made clear that this is no longer a question of if, but when and how it will happen. I am eager to continue engaging workers, business owners and advocates alike to explore potential impacts of different implementation strategies to find the most thoughtful path forward. I look forward to signing an increased minimum wage into law within the 2018 calendar year."

Though the statement doesn't mention a tip credit, Carter said during his campaign for mayor that he supports a $15 minimum without a "tip penalty," the term opponents of a lower wage for tipped workers use to describe the proposal.

Those workers and activists say a tip credit would be regressive.

"We did away with it 30 years ago, and in every state that there is a tip credit, workers are trying to get out of it," said Eli Edleson-Stein, a server who works at a fine-dining restaurant in Minneapolis.

'Many layers'

Edleson-Stein and other proponents of an across-the-board increase say a tip credit, which was phased out in Minnesota in the 1980s, invites discrimination and the possibility of wage theft.

They say if an employee doesn't make $15, even with tips, they are required to ask their employer to make up the difference, which can be an awkward situation. And with little enforcement available, that employer could easily short the employee without consequence.

On the other side of the issue, tipped workers say they fear that such a steep increase, even if it's phased in over several years like Minneapolis' new law, will put their livelihoods at risk.

They say restaurants, which often operate on razor-thin profit margins, will likely have to raise prices or change business models, which could include moving to counter service instead of full service or raising prices but softening the blow to customers by declaring that tipping is not necessary.

Those workers, who fought for a tip credit in Minneapolis under the moniker Pathway to 15, have aligned themselves with a new national organization called Restaurant Workers of America. The new organization's board includes servers from Maine, Minneapolis, Seattle and Washington, D.C., all of which are facing similar issues.

The workers who fought for a tip credit in Minneapolis say they were frustrated by the process and felt like their viewpoint was not taken into consideration. Those workers, mostly servers and bartenders, who have been holding listening sessions across St. Paul to get ahead of the issue, say they want a livable wage for everyone, too. But not at the cost of their industry being forced to change.

"There are so many layers to this, but on the very surface, what I'm fighting for is less wages for myself," said Jennifer Schellenberg, who is on the board of Restaurant Workers of America. "At the end of the day what's at risk is our livelihoods and our culture, our community."

Part of that community includes back-of-the-house workers, from dishwashers to line cooks to chefs, all of whom are notoriously paid little and work long hours.

The minimum wage increase might help the lowest paid of these workers, but many already make more than $15, which all sides agreed still isn't enough to pay for decent housing and other expenses in the metro.

'No money tree'

Minneapolis' law, which was passed in July, phases in the new minimum wage over a period of seven years for small employers, the category to which most locally owned restaurants belong.

"During those seven years, as the business accommodates my raise, the kitchen will see (no raises)," said Schellenberg, who is a server at Minneapolis' Northbound Smokehouse and Brew Pub.

And that her pay will increase isn't guaranteed, Schellenberg said. Restaurant owners are already exploring or, in some cases, implementing, a "service charge," which can be distributed however the ownership sees fit. That includes the owner keeping part or all of the charge to prop up their bottom line.

Seattle is currently phasing in a $15 minimum wage, and studies on how it is affecting the restaurant industry are mixed.

However, an October study from the nonpartisan National Bureau of Economic Research suggests the across-the-board minimum, which hasn't yet hit $15, might be hurting all low-wage workers in Seattle.

According to the study, "the second wage increase to $13 reduced hours worked in low-wage jobs by around 9 percent, while hourly wages in such jobs increased by around 3 percent. Consequently, total payroll fell for such jobs, implying that the minimum wage ordinance lowered low-wage employees' earnings by an average of $125 per month in 2016."

In other words, employers made up the difference in pay partially by cutting employees' hours.

Still, advocates with 15 Now say that the restaurant industry will figure out a way to carry on, just as it has throughout history. Similar arguments were made in the 1980s, they say, and the industry has continued to grow and flourish, despite the absence of a tip credit.

"I feel like if you can't afford to pay people a livable wage, you maybe shouldn't be in business in the first place," said St. Paul server Sarah Kopp-Reddy. "I don't think it's possible that it's going to affect businesses as much as the other side says it's going to."

Those who want a tip credit aren't willing to take that risk.

"People who don't understand our industry don't get that the owner can't just take a pay cut," Schellenberg said. "There is no money tree. I make more than the owner of the restaurant I work for."